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European Commission fines Google EUR 4.3 billion for abuse of dominant position

19 Juli 2018

Am 18. Juli 2018 verhängte die EU-Kommission aufgrund von Machtmissbrauchs eine Milliardenstrafe gegenüber Google. Unser Rechtsexperte Horst Henschen einen Überblick zur Thematik:

On the 18th of July 2018 the European Commission (“Commission”) fined Google €4.34 billion / US$5.04 billion for three types of illegal contractual restrictions on the use of Android - see the Commission’s press release.

According to the Commission, Google imposed illegal restrictions on Android device manufacturers and mobile network operators to cement its dominant position in general internet search.

During its investigation, which started in 2015, the Commission found that Google is dominant in three different markets:

  • Market for general internet search services: On this market, Google has shares of more than 90% in most EEA Member States and, according to the Commission, there are high barriers to enter these markets.
  • Market for Smart mobile operating systems available for licence: Android is a licensable smart mobile operating system. This means that third party manufacturers of smart mobile devices can license and run Android on their devices. The Commission states that through its control over Android, Google is dominant in the worldwide market (excluding China) for licensable smart mobile operating systems, with a market share of more than 95%. The reason for this high market share is the fact that other developers of operating systems for mobile devices (such as Apple iOS or Blackberry) do not licence out their systems but use them exclusively for their own devices; these systems are therefore not part of the market for licensable operation systems. In addition to the Google’s very high share of this market there are high barriers to entry, in part due to so-called network effects, i.e. the more users use a smart mobile operating system, the more developers write apps for that system – which in turn attracts more users.
  • Market for app stores for the Android mobile operating system: The Commission found that Google is also dominant in the worldwide market (excluding China) for app stores for the Android mobile operating system. Google's app store, the Play Store, accounts for more than 90% of apps downloaded on Android devices. This market is also characterised by high barriers to entry.

It is established case-law that EU competition law imposes a “special responsibility” on firms enjoying a market dominant position: While dominance as such is not an issue, the dominant position must not be “abused” by restricting competition.

While the Commission decision does not question the open source model or the Android operating system as such, the imposed fine is based on the following three types of illegal contractual – “abusive” – restrictions.  In particular, despite its dominant position in the markets described above, Google has:

  • required manufacturers to pre-install the Google Search app and browser app (Chrome), as a condition for licensing Google's app store (the Play Store);
  • made payments to certain large manufacturers and mobile network operators on the condition that they exclusively pre-installed the Google Search app on their devices; and
  • prevented manufacturers wishing to pre-install Google apps from selling even a single smart mobile device running on alternative versions of Android that were not approved by Google (so-called "Android forks").

The Commission’s decision concludes that these three types of abuse form part of an overall strategy by Google to cement its dominance over general internet searches, at a time when the importance of mobile internet was growing significantly.

The Commission calculated the fine based on its general Guidelines on fines. According to these Guidelines, the main factors determining the amount of a fine include (i) the gravity of the alleged infringement, (i) the duration of the infringement, and (iii) the value of the revenues achieved by the dominant firm in the relevant markets. On this basis, Commissioner Margrethe Vestager said in her press statement that the fine imposed on Google may be on the high end – for example because the Commission considers the three infringement to be very severe - but is not abnormal based on the standard application of the Guideline on fines.     

Google now has the option to go to the General Court and challenge the Commission’s decision.